The reasoning behind the new logic used to Capitalize Assets within the General Ledger is three fold: 1) To eliminate from the Operating Accounts the entries automatically generated by the Capitalization Process, 2) to allow for the generation of Balance Sheets containing Asset Balances at the Responsibility Center, Campus, and/or Reporting Auxiliary Levels, and 3) to allow for better control over Asset Balances by segregating them into their own Fund Group.

The following examples illustrate how to determine which Object Code and 95 Plant Fund Account will be used when entries are generated by the Capitalization Process and CAMS. Any questions or comments concerning the Capitalization of Assets, the Capital Asset Management System, and the Depreciation Process should be directed to the FMS Help Desk, 855-0375.

DETERMINING THE OBJECT CODE USED FOR CAPITALIZATION:

The proper Balance Sheet Object Code is determined by an attribute of the Financial Object Code. This attribute is called the Financial Object Code Sub Type and links the Capital Expenditure Object Codes (7XXX) to the Balance Sheet Object Codes. For example, Object Code 7015 has an Object Code Sub Type of "CM" (which stands for Capital Equipment Moveable). All Object Codes with a Sub Type of "CM" are Capitalized on the Balance Sheet as Object Code 8610. Below is a full breakdown of the Object Code Sub Types and their associated Capitalization and Accumulated Depreciation Object Codes.

SUB TYPE	EXPENDITURE OBJECT CD	SUB TYPE DESCRIPTION	CAPITAL OBJECT CD	ACCUM DEPREC OBJ CD
AM	7600	ART AND MUSEUM	8615
BD	73XX	BUILDING	8601	8901
CF	7030, 7035, 7045, 7730	CAPITAL EQUIPMENT MOVEABLE - FED FUND	8611	8910
CL	7099	CAPITAL LEASE PURCHASES	9603
CM	7000-7018, 7700, 7701	CAPITAL EQUIPMENT MOVEABLE	8610	8910
ES	7098	EQUIPMENT START-UP COSTS	8630	8930
IF	74XX	INFRASTRUCTURE	8604	8904
LA	7200	LAND	8603
LE	7800	LEASEHOLD IMPROVEMENTS	8608	8908
LF	7130, 7158	LIBRARY ACQUISITION - FED FUND	8614	8913
LI	7100, 7157	LIBRARY ACQUISITION	8613	8913
UC	7500	UNIVERSITY CONSTRUCTED	8618
UF	7530	UNIVERSITY CONSTRUCTED - FED FUND	8617	8619

Note: Assets are created for "Federally Owned" items and will appear on Inventory Listings, however, no "Federally Owned" payments are capitalized or depreciated in the General Ledger. If an object code sub type has a blank accumulated depreciation object code it is because we do not depreciate that type of asset.

DETERMING THE 95 PLANT FUND ACCOUNT USED FOR CAPITALIZATION:

The proper 95 Plant Fund Account Number is determined by both the Object Code Sub Type (mentioned above) and the Organization Code of the Account making the Capital purchase. Within the Financial Information System, each Account Number is assigned to an Organization and each Organization has been assigned two 95 Plant Fund Account Numbers. The first 95 Plant Fund Account Number, referred to as the Organization Plant Fund Account Number, is used by the Capitalization Process when Moveable Equipment items are purchased. The second 95 Plant Fund Account Number, referred to as the Campus Plant Fund Account Number, is used by the Capitalization Process when Non-Moveable Capital items are purchased. Below is a table illustrating how Object Code Sub Types dictate which of the two 95 Plant Fund Account Numbers assigned to a given Organization will be used:

SUB TYPE	EXPENDITURE OBJECT CODE	DESCRIPTION	95 PLANT FUND ACCOUNT NUMBER
AM	7600	ART AND MUSEUM	CAMPUS PLANT FUND
BD	73XX	BUILDING	CAMPUS PLANT FUND
BD	7305	BUILDING FED FUND	CAMPUS PLANT FUND
CF	7030, 7035, 7045, 7730	CAPITAL EQUIPMENT MOVEABLE - FED FUND	ORG PLANT FUND
CL	7099	CAPITAL LEASE PURCHASES	ORG PLANT FUND
CM	7000-7018, 7700, 7701	CAPITAL EQUIPMENT MOVEABLE	ORG PLANT FUND
ES	7098	EQUIPMENT START-UP COSTS	ORG PLANT FUND
IF	74XX	INFRASTRUCTURE	CAMPUS PLANT FUND
LA	72XX	LAND	CAMPUS PLANT FUND
LE	78XX	LEASEHOLD IMPROVEMENTS	CAMPUS PLANT FUND
LF	7130, 7158	LIBRARY ACQUISITIONS -FED FUND	CAMPUS PLANT FUND
LI	7100, 7157	LIBRARY ACQUISITIONS	CAMPUS PLANT FUND
UC	7500	UNIVERSITY CONSTRUCTED	ORG PLANT FUND
UF	7530	UNIVERSITY CONSTRUCTED - FED FUND	ORG PLANT FUND

EXAMPLES OF THE CAPITALIZATION PROCESS:

Account 1020000 purchases a computer under Object Code 7015 for $5,000.00. Object Code 7015 has a Financial Object Code Sub Type of "CM", therefore the Asset will be Capitalized using Object Code 8610 (see table above). Account 1020000 belongs to the Vice President/Chancellor/General Administration Organization and has been assigned an Organization Plant Fund Account Number of 9520074 and a Campus Plant Fund Account Number of 9520000. Because a Moveable Capital item is being purchased the Capitalization Process will post entries to the Organization Plant Fund Account Number, 9520070. The following entries will be generated:

	ACCOUNT	OBJECT CODE	OBJECT CODE DESCRIPTION	DEBIT	CREDIT
Actual Purchase:	1020000	7015	COMPUTER EQUIPMENT	$5,000.00
	1020000	8000	CASH IN BANK		$5,000.00
Capitalization Process:	9520074	8610	CAPITAL EQUIPMENT	$5,000.00
	9520074	9899	FUND BALANCE		$5,000.00

As a result of the above entries, Account 9520074 now shows $5,000.00 of Capital Equipment on it's Balance Sheet and Account 1020000 has incurred a Capital Expenditure on it's Operating Statement. Within the 9520074 Account an Offset of $5,000.00 was posted to Object Code 9899 to balance the entry.

ACCOUNTING ENTRIES GENERATED BY CAMS:

The Capital Asset Management System (CAMS) can generate four types of Financial Transactions that get posted to the General Ledger to properly assist with the management of the University's Assets. They are referred to as Asset Retirements, Asset Transfers, Add an Asset, and Depreciation Expense. These will be identified by the Document Types of "AR", "AT", "AA", and "DEPR" respectively. With one exception, all entries generated by these four processes will be posted to 95 Plant Fund Accounts. Only when Gift or Found Equipment is entered on the Add an Asset Document will entries be posted to an individual Operating Account. In this case, offsetting entries will get posted to Income (Object Code 1175) and Expense (7XXX) (this has no affect on Cash or Fund Balance).

1. Asset Retirement (AR): Retirement entries will, as a rule of thumb, only affect Balance Sheet Object Codes within the 95 Plant Fund. The Investment Cost (Capitalized under 86XX), the Accumulated Depreciation (recorded under 89XX) and the Residual To Gain/Loss on Disposition of Assets (Object Code 4998) of the Asset will be removed from the General Ledger. Cash will not be affected by the Retirement of an Asset.

Example: Account 2321375 purchases a desk under Object Code 7000 for $5,000.00. Object Code 7000 has a Financial Object Code Sub Type of "CM", therefore the Asset will be Capitalized using Object Code 8610 (see table above). Account 2321375 belongs to the Indiana Memorial Union Organization and has been assigned an Organization Plant Fund Account Number of 9520080 and a Campus Plant Fund Account Number of 9520000. Because a Moveable Capital item is being purchased the Capitalization Process will post entries to the Organization Plant Fund Account Number, 9520080. The following entries are then created:

	ACCOUNT	OBJECT CODE	OBJECT CODE DESCRIPTION	DEBIT	CREDIT
Actual Purchase:	1020000	7000	CAPITAL EQUIPMENT	$5,000.00
	1020000	8000	CASH IN BANK		$5,000.00
Capitalization Process:	9520074	8610	CAPITAL EQUIPMENT	$5,000.00
	9520074	9899	FUND BALANCE		$5,000.00

Now lets retire the asset using the Asset Retirement form. Assuming no depreciation had been recorded for this asset the entries would be:

	ACCOUNT	OBJECT CODE	OBJECT CODE DESCRIPTION	DEBIT	CREDIT
Retirement Entries:	9520080	4998	GAIN/LOSS DISPOSTION OF ASSETS	$5,000.00
	9520080	8610	CAPITAL EQUIPMENT		$5,000.00

This entry reverses the original Capitalization Process, removing the Asset from the 95 Account's Balance Sheet. If the Asset were half Depreciated, the Accumulated Depreciation would need to be removed and the entry would have been:

	ACCOUNT	OBJECT CODE	OBJECT CODE DESCRIPTION	DEBIT	CREDIT
Retirement Entries:	9520080	4998	GAIN/LOSS DISPOSITION	$2,500.00
	9520080	8910	ACCUM DEPR EQUIP	$2,500.00
	9520080	8610	CAPITAL EQUIPMENT		$5,000.00

2. Asset Transfers (AT):

Transferring an Asset to another Organization within the University will only affect Balance Sheet Object Codes within the 95 Plant Fund. The Capitalized Cost, the Accumulated Depreciation and the Residual Fund Balance will be removed from the Current Owner Account's Balance Sheet and placed on the Balance Sheet of the Receiving Account.

Example: Account 6048400 purchases an X-ray machine under object code 7000 for $5,000.00. Object Code 7000 has a Financial Object Code Sub Type of "CM", therefore the Asset will be Capitalized using Object Code 8610 (see table above). Account 6048400 belongs to the IH Health Center Organization and has been assigned an Organization Plant Fund Account Number of 9548400 and a Campus Plant Fund Account Number of 9520000. Because a Moveable Capital item is being purchased the Capitalization Process will post entries to the Organization Plant Fund Account Number, 9548400. The following entries are then created:

	ACCOUNT	OBJECT CODE	OBJECT CODE DESCRIPTION	DEBIT	CREDIT
Actual Purchase:	6048400	7000	CAPITAL EQUIPMENT	$5,000.00
	6048400	8000	CASH IN BANK		$5,000.00
Capitalization Process:	9548400	8610	CAPITAL EQUIPMENT	$5,000.00
	9548400	9899	FUND BALANCE		$5,000.00

Now let's Transfer the Equipment to Account 1035600 using the Asset Transfer Document in CAMS. Account 1036500 belongs to the School of Business MBA Program Organization and has been assigned an Organization Plant Fund Account Number of 9520024 and a Campus Plant Fund Account Number of 9520000. Because a Moveable Capital item is being purchased the Capitalization Process will post entries to the Organization Plant Fund Account Number, 9520024. The resulting General Ledger Entries would be:

Remove the Asset from the Original Payment Account's Balance Sheet

	ACCOUNT	OBJECT CODE	OBJECT CODE DESCRIPTION	DEBIT	CREDIT
Remove the Asset from the Original Payment Account's Balance Sheet:
	9548400	9899	FUND BALANCE	$5,000.00
	9548400	8610	CAPITAL EQUIPMENT		$5,000.00
Place the Asset on the New Owner Account's Balance Sheet:
	9520024	8610	CAPITAL EQUIPMENT	$5,000.00
	9520024	9899	FUND BALANCE		$5,000.00

Note that the same Object Codes used to Capitalize the Asset are used to Transfer the Asset. If Depreciation had been recorded for this Asset, the Accumulated Depreciation would have been transferred as well.

3. Gift or Found Equipment on Add an Asset (AA):

When entering information on the Add an Asset Document for Gift or Found Equipment, the Initiator supplies the Account Number, the Object Code and the Market Value of the item. Accounting entries are then created based on the financial information. The Account will see offsetting entries to the Expense Object Code (7XXX) entered on the Document and to Income Object Code 1175, Found Capital Equipment, for the value of the item. To better isolate Gift and Found Equipment from actual purchases on your Standard Reports, we suggest that these items be entered using object code 7700, Gifts of Capital Equipment, or 7701, Found Capital Equipment. In effect, we pretend to have received Income equivalent to the Market Value of the Asset and then to have purchased the Asset. The entries offset, having no effect on Cash or Fund Balance.

Example:

Account 1270000 finds an Asset while performing their Physical Inventory. The Fair Market Value of the Asset is determined to be $5,500.00 and the Initiator decides to use Object Code 7701. Object Code 7701 has a Financial Object Code Sub Type of "CM" therefore the Asset will be Capitalized using Object Code 8610 (see table above). Account 1270000 belongs to the Executive Management Organization and has been assigned an Organization Plant Fund Account Number of 9570074 and a Campus Plant Fund Account Number of 9570000. Because a Moveable Capital item is being purchased the Capitalization Process will post entries to the Organization Plant Fund Account Number, 9570074. The following entries are then created:

	ACCOUNT	CODE	OBJECT CODE DESCRIPTION	DEBIT	CREDIT
Transaction Entered on the Add an Asset Document:
	1270000	7701	FOUND CAP EQUIP	$5,500.00
Transaction Generated by the Add an Asset Document:
	1270000	1175	FOUND CAP EQUIP		$5,500.00
Capitalization Process:	9570074	8610	CAPITAL EQUIPMENT	$5,500.00
	9570074	9899	FUND BALANCE		$5,500.00

The only information supplied on the Add an Asset document was Account 1270000, Object Code 7701 and a Fair Market Value of $5,500.00. The remaining entries were generated by the Add an Asset Document and the Capitalization Process.

DEPRECIATION EXPENSE:

The Capital Asset Management System (CAMS) will calculate and post Depreciation Expense on a Monthly Basis. The Straight Line method will be the basis for the calculation and the "Federal Owned" portion of an Asset will be excluded from the calculation. In addition, no Depreciation will be taken on Art and Museum Objects, Land, or Leasehold Equities. Each Asset will be Depreciated from the Asset Capitalization Date (assigned when the Capital Asset Office officially recognizes an Asset) and Depreciated evenly over the Asset's Useful Life. Every Asset in the CAMS file is assigned an Asset Type that has an associated Useful Life for the Depreciation calculation. The Depreciation entry will always Debit Object Code 5115, Depreciation Expense, and Credit the appropriate Accumulated Depreciation Object Code based on the Object Code Sub Type. See Sub Type Table above. Depreciation Expense has no affect on Cash and will always be posted to the 95 Plant Fund Accounts.

Example: Account 6617000 purchases a printer for $9,000.00 using object code 7000. Object Code 7000 has a Financial Object Code Sub Type of "CM" therefore the Asset will be Capitalized using Object Code 8610 (see table above). Account 6617000 belongs to the University Printing Services Organization and has been assigned an Organization Plant Fund Account Number of 9517000 and a Campus Plant Fund Account Number of 9510000. Because a Moveable Capital item is being purchased the Capitalization Process will post entries to the Organization Plant Fund Account Number, 9517000. The following entries are then created:

	ACCOUNT	CODE	OBJECT CODE DESCRIPTION	DEBIT	CREDIT
Actual Purchase:	6617000	7000	CAPITAL EQUIPMENT	$9,000.00
	6617000	8000	CASH IN BANK		$9,000.00
Capitalization Process:	9517000	8610	CAPITAL EQUIPMENT	$9,000.00
	9517000	9899	FUND BALANCE		$9,000.00

Printers have a depreciable life of 8 years so the first month's worth of depreciation would be calculated and posted as follows:

Depreciation Expense = (Depreciable Base X (Number of Months to Depreciate / (Useful Life in Years X 12 Months per Year)))

$93.75 = ($9,000.00 X (1/(8 X 12)))

	ACCOUNT	CODE	OBJECT CODE DESCRIPTION	DEBIT	CREDIT
Depreciation Expense:	9517000	5115	DEPRECIATION EXPENSE	$93.75
	9517000	8910	ACCUM DEPR EQUIP		$93.75

Note that Depreciation Expense was posted to the same Account Number that recorded the Capitalization of the Asset. This will always be a 95 Plant Fund Account.